V še sveži raziskavi Biggerstaff, Cicero in Puckett (2013) ugotavljajo, da je izvor neetičnega delovanja podjetij v največji meri posledica nagnjenj in delovanja top menedžerjev. Nič presenetljivega sicer, saj imajo menedžerji daleč največ možnosti in sredstev, da se neetičnih dejanj sploh lotijo. Ker je osebnostne značilnosti menedžerjev težko izmeriti, so se Biggerstaff et al (2013) raziskovanja tega problema lotili prek izplačevanja opcij. Natančneje, pogledali so v kolikšni meri menedžerji v želji po maksimizaciji izplena iz opcij za nazaj datirajo pogodbe glede izplačila opcij (na zgodnejši datum, ko je bil tečaj delnic nižji). Tovrstno obnašanje menedžerjev jim služi kot indikator neetičnega delovanja menedžerjev, iz česar nato ugotavljajo ali je tovrstno delovanje menedžerjev povezano z neetičnim delovanjem podjetja, denimo pri širjenju podjetja prek akvizicij. Rezultati so pritrdilni.
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We use a largely data-driven approach to identifying CEOs who personally benefitted from options backdating.
- We consider CEOs to be ‘suspect’ if at least 30% of their options events (grants and/or exercises) were likely backdated.
- Using data from 1992 to 2009, we identify 249 suspect CEOs using this rule, and augment this list with 12 additional CEOs who were specifically named in enforcement actions or backdating settlements.
Our results indicate a strong association between the identified executives and other forms of corporate misbehaviour.
- Firms with backdating CEOs are almost 15% more likely than other similar firms to narrowly meet or beat analysts’ quarterly earnings forecasts – a tendency previous researchers have pointed to as evidence of accounting manipulations aimed at bolstering stock prices (Hayn, 1995; Degeorge et al, 1999).
- Consistent with this interpretation, firms with backdating CEOs also use significantly more positive discretionary accruals (i.e. accounting manipulations) in the quarters when they narrowly attain these thresholds.
We extend our analyses by investigating the investment activities of firms with backdating CEOs. We find:
- Firms with backdating CEOs make significantly more acquisitions and that their acquisition announcements are met with a significantly lower market response.
Prior studies (Jensen, 1986) provide evidence that excessive acquisitions (i.e., ’empire building’) provide numerous pecuniary benefits for bidder firm executives but often damage the welfare of shareholders. Interestingly, these firms were particularly more likely to acquire private targets. This may reflect a practice by unscrupulous managers of acquiring opaque assets, the reported values of which may be manipulated at the time of combination in order to gain flexibility for further earnings manipulations.
- It is also notable that the questionable acquisitions and earnings management activities that we document are concentrated in firms that hired their suspect CEOs from outside of their firm.
This pattern suggests that the greater information asymmetry faced by boards when bringing in external candidates may at times lead to costly adverse selection of chief executives who are ethical ‘lemons’.
- Our tests also demonstrate that there are significant increases in earnings management and acquisition activity after backdating CEOs arrive at their new firms, relative to that observed around CEO transitions at other similar firms.
These results suggest that hiring a CEO with low character can lead firms to adopt questionable corporate practices, and illustrate the importance of rigorous due diligence by boards when selecting new executives.
Our study concludes by assessing possible adverse consequences that might result from hiring an unethical CEO.
- We find that the market did not penalise firms with unethical CEOs during the run-up of the late 1990s and early 2000s.
- However, during the ensuing market correction, these firms were 25% more likely to experience severe stock price declines (defined as at least a negative 40% annual return).
If there was a silver lining to that storm, it is that it helped the boards of firms with unethical CEOs to see the error of their ways, as they also replaced their ill-chosen CEOs with a greater frequency.
This work suggests that integrity – in particular, executives’ integrity – matters for corporate outcomes. It provides evidence that the ethics of corporate leaders is an important determinant of the ethical cultures of the firms they manage, in support of an ethical dimension to the “upper echelons theory” of corporate behaviour first proposed by Hambrick and Mason (1984). It also should serve as notice to investors and directors of the extent of damage that can accompany a poorly managed executive search.
Vir: Biggerstaff, Cicero in Puckett (2013), voxeu